Intel Chief Executive Officer Paul Otellini will retire in May after eight years at the helm, leaving his successor the challenge of adapting the largest chipmaker to a shift in demand toward mobile devices and away from the personal-computer market it long dominated.

The board will consider internal and external candidates to replace him, Intel said Monday. The company has never chosen an outside CEO.

When Otellini, 62, began his tenure as CEO in 2005, desktop and laptop machines powered by Intel chips set the standard for personal computing. More recently, smartphones and tablets have eclipsed the number of PCs being sold, crimping Intel's revenue. Amid an economic slump this year, the PC industry is expected to post its first annual decline in more than a decade.

"They need someone with a strong understanding of the mobile landscape to guide them for the next six to eight years," Patrick Wang, an analyst at Evercore Partners Inc. "They'd be in great shape if they were to add significant mobile expertise to that management team."

Intel's shares gained less than 1 percent Monday to finish the day at $20.25. The stock had declined 17 percent this year.

"The board accepted Paul's decision with regret," said Paul Bergevin, vice president of communications at the Santa Clara company.

Past successions

On Monday the company promoted three senior leaders to the position of executive vice president: Stacy Smith, chief financial officer and director of corporate strategy; Brian Krzanich, chief operating officer; and Renee James, head of Intel's software business.

In past successions, Intel has elevated the current chief operating officer to the top job. Both Otellini and his predecessor, Craig Barrett, stepped up from that position. Otellini, having served as technical assistant to former CEO Andy Grove, is also the product of Intel's internal development program to groom future leaders.

"We have excellent internal candidates, but will also look outside," said Chuck Mulloy, an Intel spokesman.

Under Intel bylaws, Otellini could have continued to serve as CEO until May 2016, when he would have reached the company's mandatory retirement age.

"After almost four decades with the company and eight years as CEO, it's time to move on and transfer Intel's helm to a new generation of leadership," Otellini said in a statement.

Krzanich, 52, was promoted to COO in January. He was head of the company's manufacturing operations and now also leads human resources. He joined the company in 1982 after graduating from San Jose State University with a degree in chemistry. Smith, 50, has held positions in sales and marketing and finance and became assistant CFO in 2006. James, 48, who began as a product manager at Intel 25 years ago and has held a variety of positions across the company since, would be its first female CEO if she were chosen.

CEO candidates

Intel should consider external candidates, including someone with experience changing course at a large company, said Doug Freedman, an analyst at RBC Capital Markets.

"If the board really wants a change, they've got to go and get a turnaround guy," Freedman said. "That's difficult for a company the size of Intel. You'd need someone from a big company."

Freedman said that the board might look at Sanjay Jha, the former CEO of Motorola Mobility, or executives from Qualcomm. Jha also served as operating chief at Qualcomm. Of the internal candidates, he said "Stacy is the most focused of the three, but do you want a finance guy running a technology company?"

Otellini helped Intel rebound from a 42 percent drop in profit in 2006 as the company lost share in the server market to Advanced Micro Devices. He presided over record profit and sales for two years starting in 2010. Last month, slow factory output and rising stockpiles of unsold chips led the company to forecast fourth-quarter profit margins that fell short of analysts' estimates.

The total PC market will contract by 1.2 percent to 348.7 million units this year, according to IHS iSuppli. That's the first annual decline since 2001, the market researcher said.

Intel's biggest customers are PC makers Hewlett-Packard and Dell, according to a Bloomberg supply-chain analysis.

Qualcomm, the world's largest maker of chips for phones, surpassed Intel in market value for the first time this month and is predicting double-digit earnings growth for the next five years.

Smartphone market

Like his predecessors, Otellini failed to parlay Intel's position in computers, where it has more than 80 percent of the market for processors, to a stake in the more rapidly growing market for phones.

This year the company announced its first customers in phones, including Google's Motorola unit. As yet, the company has less than 1 percent of that market, according to research firm Forward Concepts Co.

"Paul Otellini has been a very strong leader, only the fifth CEO in the company's great 45-year history, and one who has managed the company through challenging times and market transitions," said Andy Bryant, chairman of the board.